Apple Slides Despite Record Revenue EPS Beat As iPhone Service Revenues Come In Light

Apple Slides Despite Record Revenue EPS Beat As iPhone Service Revenues Come In Light

Apple Slides Despite Record Revenue , EPS Beat As iPhone, Service Revenue s Come In Light

With Amazon imploding after dismal earnings and catastrophic guidance, it was all up to the world’s biggest compan y , AAPL, to provide some – an y – hail mar y for a tech earnings season that has been an unmitigated disaster. Alas, it was not meant to be and despite beating on the top and bottom line, AAPL has joined the parade of doom and tumbling after hours due to numbers which the market was clearl y not impressed with, and which confirm that the US and global economies are on the verge of a painful recession.

Here are the fiscal Q4 details:

EPS $1.29 vs. $1.24 y / y , beating estimate s of $1.26
Gross margin $38.10 billion, +8.3% y / y , beating estimate s of $37.31 billion
Revenue $90.15 billion, +8.1% y / y and a record for the September quarter, beating est. $88.64 billion
Products revenue $70.96 billion, +9% y / y , beating estimate $69.04 billion
IPhone revenue $42.63 billion, +9.7% y / y , missing estimate $42.67 billion
Mac revenue $11.51 billion, +25% y / y , beating estimate $9.25 billion
IPad revenue $7.17 billion, -13% y / y , missing estimate $7.81 billion, and down for the 4th quarter in a row.
Wearables, home and accessories $9.65 billion, +9.8% y / y , beating the estimate $8.8 billion
Service revenue $19.19 billion, +5% y / y , missing estimate $19.97 billion

Commenting on the quarter, Tim Cook said that “as we head into the holida y season with our most powerful lineup ever, we are leading with our values in ever y action we take and ever y decision we make. We are deepl y committed to protecting the environment, to securing user privac y , to strengthening accessibilit y , and to creating products and services that can unlock humanit y ’s full creative potential.”CFO Luca Maester chimed in: “our record September quarter results continue to demonstrate our abilit y to execute effectivel y in spite of a challenging and volatile macroeconomic backdrop. We continued to invest in our long-term growth plans, generated over $24 billion in operating cash flow, and returned over $29 billion to our shareholders during the quarter. The strength of our ecos y stem, unmatched customer lo y alt y , and record sales spurred our active installed base of devices to a new all-time high. This quarter capped another record-breaking y ear for Apple, with revenue growing over $28 billion and operating cash flow up $18 billion versus last y ear.”Cutting to the chase, y es: Apple repurchased some $25 billion in stock in fiscal Q4. The question is will it continue the bu y backs at this craz y pace, or will it slow down as man y are worried that it, and other tech peers, must do as we enter a recession.Going back to the results, while Apple actuall y did prett y well in most categories, it disappointed in iPhone sales, which however was to be expected with several warnings in the past 3 weeks that iPhone 14 sales will be a disappointment. At $42.63 billion, or up 9.7% y / y , this missed the estimate of $42.67 billion.

iPhone sales aside, Apple’s other product categories were a mixed bag: iPad sales came in at $7.2BN, down 13% Y/Y and sliding for the fourth quarter in a row and missing estimate s of $7.81BN; Mac revenue was $11.51N, up 25% and solidl y beating estimate s of $9.25BN. Most of the quarter’s beat appears to be in this segment. Wearables were also solid at $9.65BN, up 9.8% Y/Y, and beating the $8.8BN estimate .

But where the market was especiall y concerned, was Service revenue of $19.19BN, which badl y missed the $19.97BN estimate …

… and rose just 5% Y/Y, the lowest annual growth in histor y .

A silver lining here: the price hikes for Apple Music and Apple TV+ earlier this week should give investors confidence that the miss on Services ma y not be a long-term issue. Still, the services number is strong compared with last y ear.One other place where investors were disappointed, was China sales, because while for the most part the sales breakdown came in as expected, with growth ever y where except in Japan…

… China revenue rose 6.2% to $15.47BN, missing the estimate of $15.65BN.

And another potential problem: AAPL’s net cash has cratered, sliding to just $49 billion, or where it was in 2010, having spent tens of billions on stock bu y backs. Let’s hope that Apple doesn’t actuall y need to use that cash…

In response to these mixed earnings, the stocks first tumbled, then rebounded and was last seen drifting modestl y lower, about 1% below the closing price although that is a notable improvement from where it traded briefl y after hours. As Bloomberg puts it, “Apple shares are teetering between red and green, which makes sense. This is a mixed report. Overall revenue is great, all things considered, but investors probabl y wish that the iPhone and Services — which should have been highlights — were a bit stronger. Still, Apple is in a far better position right now than competitors like Meta, Alphabet and Amazon.”

Still, down 1% after earnings is not a bad result compared with tech peers. Amazon is down 18% at last check.

Developing.

T y ler Durden
Thu, 10/27/2022 – 17:15

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